New South Wales was established in 1788 as a British penal colony, yet the practical need to make convicts work helped turn it into a society with unusually inclusive economic institutions. Convicts could eventually earn wages, conduct businesses, acquire land, and regain their rights; disputes over who would control land and political decision-making then set former convicts and their families against a wealthy colonial elite.

A penal colony on the eastern coast

After the United States ceased to receive British convicts following independence, British officials looked for another destination. They rejected West Africa because malaria and yellow fever made it deadly for Europeans, and settled on Australia’s temperate eastern coast. On January 26, 1788, a fleet of eleven ships under Arthur Phillip established a camp at Sydney Cove and named the colony New South Wales.

The transported population included Henry and Susannah Cable and their young son. Susannah had first been sentenced to death for theft, then had her sentence commuted to transportation. When she was selected for the fleet but Henry was not, their family faced separation. A campaign organized by Lady Cadogan secured Henry’s inclusion and raised £20 for goods for the family. They sailed together aboard the Alexander, but the parcel had disappeared by the time they arrived at Botany Bay; the ship’s captain, Duncan Sinclair, claimed it was missing.

Convict labor and changing economic institutions

The colony initially consisted largely of convicts and their guards, most of them soldiers. Convicts were made to perform compulsory labor, and at first received food but no pay while guards kept what they produced. The arrangement gave workers little reason to work hard or carefully. Lashing and banishment to Norfolk Island did not solve the problem, so the guards turned to incentives: convicts who completed assigned tasks could use their spare time to work for themselves and sell what they made.

That change began a broader shift. Convicts were allowed to become entrepreneurs and hire other convicts; after completing their sentences, some received land and had their rights restored. Henry Cable, who was illiterate, became a conspicuous example of the opportunities this system could create. By 1798 he owned a hotel, the Ramping Horse, and a shop, and had bought a ship to trade in sealskins. By 1809 he owned at least nine farms, amounting to about 470 acres, as well as shops and houses in Sydney.

The colony’s labor conditions helped distinguish its development from societies built on serfdom or the exploitation of large Indigenous populations. With convicts as the available workforce, paying for labor became a practical means of securing it. The resulting institutions were more inclusive than those in several European and Latin American colonies, even though convicts had initially arrived with almost no legal or economic rights.

The struggle over land and representation

As the wool economy expanded, free settlers joined former guards and soldiers in an elite that held most of the property. The elite’s interests included securing legal title to land on which its members had squatted. Convicts, former convicts, and their families sought different changes: an end to transportation, trial by a jury of their peers, and access to free land. The British government backed the elite, while also fearing that its leaders might eventually seek independence.

In 1819 the government sent John Bigge to investigate the colony. Bigge was alarmed by the rights convicts had acquired and by the colony’s inclusive economic arrangements. He recommended reversing them: convicts should not own land or receive wages, pardons should be restricted, former convicts should not be granted land, and punishments should become harsher. He regarded the squatters as Australia’s natural aristocracy and envisaged an autocratic society dominated by them.

Former convicts and their children, however, pressed for political institutions that would allow them to protect their economic and political rights. They demanded elections in which they could participate as equals and representative assemblies in which they could hold office. The colony’s development was therefore not only a matter of access to work or property: it also raised the question of who would take part in the decisions that shaped those rights.

A colony with its own institutional path

New South Wales did not simply reproduce Britain’s arrangements. Its first civil case, involving the missing goods intended for the Cables, was decided despite the severe legal disadvantages convicts faced under British law: they could not own property, sue, or give evidence in court. The judgment against Sinclair stood, requiring him to pay fifteen pounds. A later criminal case, concerning one convict’s theft of another convict’s bread, likewise brought into court an act that British law would not have treated as theft because convicts were not permitted to own anything. Such cases marked the colony’s divergence from British law as well as from British economic and political institutions.

The contest over inclusion continued as the colony’s population and wealth grew. New South Wales combined arrangements that had begun to give former convicts economic opportunities with sharp disputes over land, representation, and elite control. Its significance lies in that tension: institutions formed under penal rule could become more inclusive in practice, while the people who benefited from them still had to demand a political voice capable of defending those gains.